In Micron Technology, Inc. v. Rambus Inc., Civ. No. 00-792-SLR (January 9, 2009), the U.S. District Court for the District of Delaware ruled that 12 Rambus patents were unenforceable against Micron, after it concluded that Rambus intentionally destroyed numerous relevant documents in preparation for enforcing its patent portfolio. At issue before the District Court was whether Rambus destroyed certain documents in bad faith when litigation was reasonably anticipated, and if so, the appropriate remedy for such spoliation of evidence. While another federal district court reviewed the same conduct in related litigation and declined to find bad faith, the Delaware District Court stated that Rambus’ “spoliation conduct was extensive, including within its scope the destruction of innumerable documents relating to all aspects of Rambus’ business.” Thus, the District Court concluded that the appropriate sanction for such spoliation of evidence was to declare the 12 Rambus patents in suit unenforceable against Micron.
As a general rule, “[o]nce a party reasonably anticipates litigation, it must suspend its routine document retention/destruction policy and put in place a ‘litigation hold’ to ensure the preservation of relevant documents.” Zubulake v. UBS Warburg LLC, 220 F.R.D. 212, 218 (S.D.N.Y. 2003). In the Delaware case, the court concluded that Rambus continued to destroy documents even when litigation was reasonably anticipated. Rambus’ conduct can be summarized according to the following timeline:
- October 1997: Rambus hires in-house counsel to manage patent portfolio.
- March 1998: Rambus in-house counsel works with outside counsel to develop both licensing and litigation strategies. Specific to litigation, the in-house counsel and outside counsel discuss trial graphics and claims, retaining experts, gathering critical documents and implementing a document retention policy, and building a case against potential litigation targets, including Micron, Fujitsu, Samsung and Hyundai.
- July 1998: Rambus implements companywide document retention policy.
- August–September 1998: Rambus retains outside patent prosecution counsel.
- September 3, 1998: Rambus employees participate in a first “Shred Day,” where employees destroy documents pursuant to the company’s new document retention policy.
- Near end of 1998–December 1998: Rambus identifies potential litigation targets in anticipation that business negotiations with Intel might fail. Rambus creates internal claim charts asserting infringement against Micron. Rambus also articulates a time frame and motive (around Q1 of 2000, to allow industry investment to reach the “point of no return”) for implementation of Rambus litigation strategy.
- April 1999: Rambus instructs outside prosecution counsel to purge Rambus’ patent files.
- August 1999: Rambus employees participate in a second “Shred Day.”
- October 1999: Rambus executives select Hitachi as litigation target.
- November 1999: Hitachi is notified of Rambus patents.
- December 1999: Rambus institutes litigation hold.
The District Court found that litigation was reasonably foreseeable no later than December 1998, when Rambus had identified a time frame and motive for implementation of the Rambus litigation strategy. The court also determined that because the document retention policy was discussed and adopted in the context of Rambus’ litigation strategy, Rambus should have known that general destruction of documents in accordance with the document retention policy was inappropriate because certain of the destroyed documents would become material at some point in the future. Therefore, the District Court found that Rambus’ duty to preserve relevant documents arose in December 1998, and any documents purged from that point forward were deemed to be destroyed in bad faith. Thus, the District Court concluded that the appropriate sanction for such bad-faith destruction of documents was to declare the 12 Rambus patents in suit unenforceable against Micron.
This Delaware District Court ruling that 12 of Rambus’ patents are unenforceable against Micron is inconsistent with a prior ruling by a California District Court. In particular, Hynix Semiconductor Inc. had presented similar spoliation-of-evidence arguments in a California case, but the California District Court ruled in January 2006 that Hynix had failed to establish a case for unclean hands.1 Accordingly, on February 3, 2009, a California district judge instituted a stay in Rambus’ consolidated patent litigation2 in California. The California district judge noted that “[t]his lingering issue of whether or not Rambus’ patents are enforceable (or subject to some lesser sanction) creates a pressing need for this court to postpone the patent infringement trial” until the Court of Appeals for the Federal Circuit resolves the spoliation-of-evidence issues. The Delaware federal district judge has taken similar steps to stay those proceedings as well.3
Even before the Federal Circuit weighs in, this case certainly serves as a reminder that a company seeking to license or enforce its patent portfolio should carefully evaluate whether any adjustments or exceptions should be made to its document retention policy early in the process.